[2008] AIRCFB 635

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AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

DECISION

Workplace Relations Act 1996
Clause 29 of Schedule 6 and s.553(1) applications to vary awards
Clause 42 of Schedule 6 and s.113 references to Full Bench

JUSTICE GIUDICE, PRESIDENT VICE PRESIDENT WATSON DEPUTY PRESIDENT HAMILTON COMMISSIONER FOGGO COMMISSIONER WHELAN

MELBOURNE, 27 AUGUST 2008

Introduction

[1] This decision deals with a number of applications by registered organisations of employees to increase minimum award rates of pay and allowances on account of the July 2008 Wage-Setting Decision of the Australian Fair Pay Commission (AFPC) (the July 2008 AFPC decision). In that decision the AFPC decided to increase the standard Federal Minimum Wage (FMW) by $21.66 per week and all adult Pay Scales by “approximately $21.66” per week. The increases are to operate from the first pay period on or after 1 October 2008. There are 12 applications before us to vary transitional awards and 12 applications to vary pre-reform awards. A list of the applications is attached to this decision (Appendix A). The applications are to:

(a) increase the FMW in transitional awards by $21.70,
(b) increase minimum wage rates in the transitional awards by $21.70 and
(c) make a commensurate adjustment in wage-related allowances in all of the awards.

[2] The statutory context for these proceedings is fully set out in the Wages and Allowances Review 2006 decision. 1 It is sufficient to indicate that we are dealing with applications to vary two types of awards: transitional awards and pre-reform awards. Transitional awards apply to employers and employees covered by a federal award prior to 27 March 2006 if the employer is not an employer as defined in s.6(1) of the Workplace Relations Act 1996 (the Act). Pre-reform awards apply to employers and employees covered by a federal award prior to 27 March 2006 if the employer is an employer as defined in s.6(1) of the Act. Pursuant to s.22 of the Act the AFPC exercises wage-setting powers in relation to employees of employers as defined in s.6(1) of the Act except those covered by transitional awards, but does not have power to adjust allowances. This Commission retains power to adjust the FMW and other minimum wage rates in transitional awards as well as the power to adjust allowances in all federal awards, both transitional and pre-reform.

[3] Since its creation in 2005 the AFPC has made three wage-setting decisions and on each occasion, of which this is the most recent, application has been made to reflect the outcome in awards within the jurisdiction of this Commission. The Commission’s most recent relevant decision was in August 2007. 2

Statutory Provisions

[4] In considering these applications the Commission is guided by statutory provisions relating to its powers of award variation. We mention first the provisions relating to transitional awards. The Commission’s power to vary transitional awards is governed by Schedule 6 to the Act. Clause 8 of Schedule 6 is as follows:

“8 Performance of Commission’s functions under this Schedule

(1) The Commission must perform its functions under this Schedule in a way that furthers the objects of this Schedule.

(2) In performing its functions under this Schedule, the Commission must ensure that minimum safety net entitlements are maintained for wages and other specified monetary entitlements, having regard to:

(a) the desirability of high levels of productivity, low inflation, creation of jobs and high levels of employment; and

(b) the principle that the wages and other monetary entitlements of transitional employees should not place them at a disadvantage compared with the entitlements of employees (within the meaning of subsection 5(1)); and

(c) the principle that the costs to transitional employers of wages and other monetary entitlements should not place them at a competitive disadvantage in relation to employers (within the meaning of subsection 6(1)).

(3) In having regard to the factors referred to in paragraph (2)(a), the Commission must have regard to:

(a) wage-setting decisions of the AFPC; and

(b) in particular, any statements by the AFPC about the effect of wage increases on productivity, inflation and levels of employment.

(4) In performing its functions under this Schedule, the Commission must have regard to:

(a) the desirability of its decisions being consistent with wage-setting decisions of the AFPC; and

(b) the importance of providing minimum safety net entitlements that act as an incentive to bargaining at the workplace level.”

[5] As can be seen, cl.8(1) requires the Commission to carry out its functions in a way that furthers the objects of Schedule 6. The objects of Schedule 6 are in cl.1(2) of the Schedule and include the following:

“(2) The objects of this Schedule are to ensure that, during the transitional period:

(a) transitional awards continue in operation and are maintained by the Commission, within the limits specified in this Schedule; and

(b) transitional employers and their employees are able to cease to be bound by a transitional award in appropriate circumstances, including by making agreements under State laws; and

(c) the Commission’s functions and powers to vary transitional awards are exercised so that wages and other monetary entitlements are not inconsistent with wage-setting decisions of the AFPC;

… … …”

[6] The Commission’s power to vary pre-reform awards is in Part 10 of the Act. In carrying out its functions under that part the Commission must have regard to a number of matters specified in s.511(2) of the Act including “decisions of the AFPC and, in particular, the need to ensure that Commission decisions are not inconsistent with AFPC decisions.”

The Amounts to be Awarded

[7] There is no opposition to the substance of the applications. The Australian Catholic Council for Employment Relations (ACCER) submitted, however, that the FMW as set by the AFPC is inadequate. We shall deal with that submission first.

[8] The ACCER submission, as advanced orally, sought an increase in the FMW in transitional awards of $30.50 per week to the level of $522.70 per week. This can be contrasted with the increase determined by the AFPC in its wage-setting decision of $21.66 per week and the claim in these proceedings for an increase of $21.70 per week.

[9] ACCER’s submissions are summarized in the following extract from its written submissions:

“5. ACCER submits that the Commission should not follow the AFPC decision to increase the FMW by only $21.66 per week because the AFPC, in exercising its powers and in having regard to the provision of a safety net for the low paid:

(a) made errors of fact by

• failing to properly consider and take into account the housing costs of low paid workers and their dependents;



• acting on estimates of the housing costs of low paid workers (being, inter alia, $158.74 per week for a family of four and $122.34 per week for a single person in December 2007) that were not based on any or any proper evidence;



• failing to take into account relevant material regarding housing costs; and



• failing to take into account the consequence that, having regard to housing costs, some FMW-dependent workers and their families (including a family of two adults and two children) would be living below the poverty line that the AFPC used for the purpose of identifying the living costs of low paid workers and their families; and

(b) made errors of law and/or principle by:

• deciding that it should set the FMW on the basis of the needs of a single person without dependants;



• finding that a wage that provides a “reasonable margin” above the Henderson Poverty Line for a single person (which margin it found to be 25%) should be the appropriate wage rate “for a person earning the lowest adult full time wage in the regulated market sector”;



• failing to set a wage that would permit adequate support for workers with dependants;



• setting wages at a level that would require that the costs of supporting the families of FMW-dependent workers to pass to the Commonwealth, without any commitment from the Commonwealth that it would do so;



• adopting a policy on the setting of the FMW that is not supported by, and is inconsistent with, established principles of wage-setting in Australia and inconsistent with the Minimum Wage Fixing Convention, 1970; and



• failing to have proper regard for the anti-discrimination provisions of section 222 of the Act by setting the FMW at a rate, and for reasons, that do not take account of, and are contrary to, the principles of the Family Responsibilities Convention and by failing to ensure that its decision does not contain provisions that discriminate because of, or for reasons including, family responsibilities.”

[10] ACCER asked us to increase the FMW to $522.70 “…as the first modest step in moving towards a fair and reasonable safety net for low paid Australian working families.” It proposed in the alternative that the Commission might prefer to make a final decision and not an interim one. Unresolved issues might be dealt with as part of the award modernisation process.

[11] ACCER’s submissions touch on some of the fundamental issues in minimum wage fixation and in the fixation of the FMW in particular. In considering these submissions, however, there are a number of matters to be kept in mind. The first of these relates to poverty benchmarks. When the FMW was introduced in its current form by the Commission in April 1997 the Bench declined to link the level of the FMW to any defined benchmark of needs, deciding instead to equate the FMW with the minimum classification rate in most federal awards, equivalent to the rate of the C14 classification in the Metal Industry Award as it was then known. 3 While the Commission has indicated on several occasions since 1997 that it was prepared to consider adopting a benchmark or benchmarks, that proposal was never fully explored.4 As we understand the position, the AFPC has also declined to adopt a benchmark or benchmarks. While changes in some benchmarks, such as the Henderson Poverty Lines, have been taken into account in its wage-setting decisions, the AFPC has made it plain that ultimately its decisions are based on a range of factors.

[12] Another important matter is that the proportion of the workforce covered by transitional awards is likely to be very small. The Australian Council of Trade Unions relied on Australian Bureau of Statistics (ABS) data which suggest that 79 per cent of employees are covered by the federal system and only 2 per cent of that group are covered by transitional awards. Material produced by the Commonwealth at our request, also from the ABS, suggests that the percentage of employees covered by transitional awards might be less than 1 per cent. Whatever the true position is, the proportion of the workforce employed under transitional awards is likely to be very small. In this context it is relevant that, at present, the AFPC is the pre-eminent tribunal for the fixation of minimum wages for employees in the federal system. Statutory recognition of this position is made explicit by the obligations placed on this Commission to have regard to the AFPC’s wage-setting decisions and the need to ensure that Commission decisions are not inconsistent with AFPC decisions. For the immediate future, submissions such as those advanced by ACCER should continue to be addressed to the AFPC. We should add that we are not persuaded on the case advanced that we should reject the AFPC’s determination and substitute our own decision. Finally, ACCER apart, there is broad agreement from the parties, including the peak union and employer bodies, that we should adopt the substance of the AFPC’s decision.

[13] For these reasons we reject ACCER’s submissions in relation to the FMW.

[14] We have decided to increase minimum weekly rates in the transitional awards before us by $21.70 per week. Wage-related allowances in the transitional and pre-reform awards before us will be increased proportionately in accordance with the Commission’s normal principles. The variations will operate from the first pay period to commence on or after 1 October 2008.

[15] Consistent with this decision proportionate increases should flow to the transitional award rates for junior employees, employees to whom training arrangements apply, casual employees and all other similar groups. We deal with the Supported Wage System separately.

[16] Where application is made to reflect this decision in other transitional and pre-reform awards, any variation should not operate before the first pay period to commence on or after 1 October 2008. We addressed the question of retrospective operation of variations in the Wages and Allowances Review 2007 decision. 5 It is unnecessary to repeat all of what was said there. Unless the Commission is satisfied that there are exceptional circumstances the date an award variation is expressed to come into force must not be earlier than the date on which the variation is made.6

Rural Employers

[17] In its July 2007 Wage-Setting Decision the AFPC decided to defer the increases it set in that decision in the case of some rural employers. It provided that rural employers in receipt of specified government financial assistance should not be obliged to increase Pay Scales for a maximum of 12 months. 7 In its Wages and Allowances Review 2007 decision this Commission adopted the same approach in relation to minimum rates in transitional awards. This Commission also decided to defer increases in wage-related allowances for rural employers covered by transitional and pre-reform award on the same basis.8 In its July 2008 decision the AFPC decided that no further deferral of increases is necessary. We shall adopt this element of the AFPC decision also. The deferral of increases in wages and allowances for the rural employers concerned should cease with the implementation of this decision.

Supported Wage System

[18] The July 2008 AFPC decision increased the minimum weekly amount payable under instruments which give effect to the Supported Wage System by $3 per week to $69 per week with effect from the first pay period on or after 1 October 2008. The ACTU requested us to consider increasing the minimum amount payable under the Supported Wage System model clause in transitional awards in the same way. No party opposed that course and we adopt it. The variation to the Supported Wage System clause should be made at the time the award is varied to give effect to the other increases provided for in this decision.

Statement of Principles

[19] Some employers urged us to apply the Commission’s Statement of Principles to the increase. It was submitted that there should be 12 months between increases flowing from the AFPC’s wage-setting decisions. It was also suggested that unions should be required to give a commitment to absorb increases in minimum award rates flowing from this decision in over award payments and that we should include a related provision in the awards. We have dealt with these submissions in previous cases. We again repeat and adopt what the Commission said in the Wages and Allowances Review 2006 decision:

“[64] A number of issues about the Statement of Principles arise for decision in these proceedings. The first of these is the operation of the so-called 12 month rule in Principle 8(b). In our view it would be inconsistent with the approach adopted by the AFPC in its October 2006 decision if we were to apply the 12 month rule to minimum rates in transitional awards and furthermore it would clearly be inequitable to do so. ACCI proposed that we should require a commitment to absorption from unions of the kind contained in Principle 8(d). We think such a provision is unnecessary, although the matter can be further considered in the context of the foreshadowed conference. Similarly, there is no need for an award clause of the kind in Principle 8(c). It is clear the variations will only have effect in relation to minimum award rates.

[65] To the extent that the Commission’s Statement of Principles is inconsistent with this decision this decision will prevail. To avoid doubt, the so-called 12 month rule in Principle 8(b) shall have no application, we shall not require unions to give a commitment to absorption of the kind referred to in Principle 8(d) and there will be no requirement for awards to include a clause in the form provided for in Principle 8(e). It is clear that the variations will only have effect in relation to minimum award rates. Principle 12 Economic Incapacity will continue to be available.” 9

[20] The orders necessary to give effect to this decision will be settled by Commissioner Foggo with recourse to the Bench. Where applications are made to implement this decision and the parties jointly agree that no hearing is necessary the Commission will attempt to facilitate the settlement of orders without requiring the parties to attend a hearing.

BY THE COMMISSION:

PRESIDENT

Appearances:

G Belchamber with M Gaynor for the Australian Council of Trade Unions on behalf of applicant unions and with N Swancott for the Liquor, Hospitality and Miscellaneous Union, A Leszczynski for the Finance Sector Union of Australia, J Miles for the Australian Municipal, Administrative, Clerical and Services Union, J Kelly for The Association of Professional Engineers, Scientists and Managers, Australia, S Taylor for the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, R Reid for the Construction, Forestry, Mining and Energy Union, FFPD and J Ellis for the Australian Workers Union.

M Mead and J Young for the Australian Industry Group and Engineering Traders Association of South Australia.

D Mammone and C Harris for the Australian Chamber of Commerce and Industry on behalf of Australian Business Industrial, Australian Hotels Association, Australian Retailers Association, Victorian Employers Chamber of Commerce and Industry, the South Australian Chamber of Commerce and Industry and the Metal Industry Association of Tasmania.

B Lawrence with Father J Caddy and S O’Connor for the Australian Catholic Council for Employment Relations.

J Smith for the Transport Workers Union of Australia.

ER Cole and T Smith for the Minister for Employment and Workplace Relations on behalf of the Commonwealth.

C Hennings for the National Farmers Federation.

E Watt for the Timber Merchants Association Victoria and the Timber Trade Industrial Association.

P Clarke for the Victorian Hospitals’ Industrial Association.

J Hargrave for the Printing Industries Association of Australia.

D Duke for the Victorian Automobile Chamber of Commerce.

C Graham for free to air commercial television stations.

AH Mussert for the National Insurance Brokers Association.

Hearing details:

2008.
Melbourne:
July 27, Directions before Giudice J.
August 14.

 1   PR002006; (2006) 160 IR 240 at paras 4-7.

 2   Wages and Allowances Review 2007 decision, [2007] AIRCFB 684; 167 IR 361.

 3   Safety Net Review – Wages April 1997 decision, Print P1997; (1997) 71 IR 1. See the majority decision at pp. 65-67, 76-77.

 4   Safety Net Review – Wages May 2003 decision, PR002003; (2003) 121 IR 367 at paras 221 and 222. Safety Net Review – Wages May 2004 decision, PR002004; (2004) 129 IR 389 at paras 258-286.

 5   Ibid., at paras 18-20.

 6   Workplace Relations Act 1996 s.572 and cl.66 of Schedule 6.

 7   AFPC July 2007 decision: p.37 at para H1.

 8   See Wages and Allowances Review 2007 decision, [2007] AIRCFB 684; 167 IR 361 at paras 10-17.

 9   PR002006; (2006) 160 IR 240 at paras 64-65.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR002008>

APPENDIX A – LIST OF APPLICATIONS

C2008/114		Dry Cleaning Industry Award 2000		AP779906CAV
C2008/118		Dry Cleaning Industry Award 2000[Transitional]		AT779906CAV
C2008/115		The Hospitality Industry - Accommodation, Hotels, Resorts and Gaming Award 1998		AP783479CRV
C2008/119		The Hospitality Industry - Accommodation, Hotels, Resorts and Gaming Award 1998 [Transitional]		AT783479CRV
C2008/116		Liquor Industries - Racecourses Showgrounds etc. - Casuals Award 1998		AP787006
C2008/120		Liquor Industries - Racecourses Showgrounds etc. - Casuals Award 1998 [Transitional]		AT787006
C2008/117		Saddlery, Leather, Canvas and Plastic Material Workers’ Award 1999		AP795956CNV
C2008/121		Saddlery, Leather, Canvas and Plastic Material Workers’ Award 1999 [Transitional]		AT795956CNV
C2008/2627		Clerical and Administrative Employees (Victoria) Award 1999		AP773032CRV
C2008/2628		Clerical and Administrative Employees (Victoria) Award 1999 [Transitional]		AT773032CRV
C2008/2629		Crisis Assistance, Supported Housing Award 2002		AP813963
C2008/2630		Crisis Assistance, Supported Housing Award 2002 [Transitional]		AT813963
C2008/2631		Victorian Local Authorities Award 2001		AP811556
C2008/2632		Victorian Local Authorities Award 2001 [Transitional]		AT811556
C2008/2636		Timber and Allied Industries Award 1999		AP800937CRV
C2008/2637		Timber and Allied Industries Award 1999 [Transitional]		AT800937CRV
C2008/2638		Insurance Industry Award 1998		AP784988CRV
C2008/2646		Information Technology Industry (Professional Employees) Award 2001		AT812692CAV
C2008/2660		Horticultural Industry (AWU) Award 2000 [Transitional]		AT784867CRV
C2008/2661		Horticultural Industry (AWU) Award 2000		AP784867CRV
C2008/2662		Metal, Engineering and Associated Industries Award 1998 [Transitional]		AT789529CRV
C2008/2663		Metal, Engineering and Associated Industries Award 1998		AP789529CRV
C2008/2664		Graphic Arts - General - Award 2000 [Transitional]		AT782505CR
C2008/2665		Graphic Arts - General - Award 2000		AP782505CR